The Virus has been underestimated, misunderstood and taken every government by surprise.
Richard Neher an evolutionary biologist from the University of Basel, Switzerland started researching seasonal Flue and has since developed an on-line interface that tracks and monitors these types of virus as they mutate and spread around the globe. His team built a similar platform to chart the transmission of MERS and Ebola and called the site NextStrain.org. The scenarios with Ebola were scary enough but they were kept isolated to a few African countries. It is a constant battle and this virus has caught many on the hop.
Now, they’ve adapted it to keep track of the genetic tweaks to SARS-CoV-2 as it spreads around the globe and chart the viral lineages on world maps to watch, almost in real time, as the virus moved from major hotspots in China to other countries.
There’s still so many things that the experts don’t understand, or don’t agree on. The answers are coming, but it’s still early days. It is why the situation is so unpredictable, but the knock-on effects to world economy is still to come.
As the virus began to spread, Western nations complacently shrugged it off and assumed it would remain in Asia, but it didn’t. The World Health Organization even refused to call it a ‘pandemic’ until March 11.
Investors around the world ignored this for months, completely underestimating the massive, worldwide economic impact the virus would have.
Even now, after one of the worst USA stock market crashes in history, people are still woefully underestimating the effects.
We are not only considering the stock market we are also looking at the banks.
Are the Banks about to drown in another ocean of defaults?
There’s $250 Trillion in global debt right now– mortgages, credit card debt, business loans, government debt, etc. and banks own a large portion of that debt.
This virus crisis could trigger a wave of defaults from consumers, businesses, and even governments.
Tourism makes up 10% of global GDP. Revenue in that sector which includes hotels, airlines, cruise ships, etc. has collapsed, the weaker companies aren’t going to survive. Already a struggling airline in the UK has folded.
The crash in oil prices may wipe out countless oil companies.
Many large retail chains, already struggling because of competition with the internet. Could quite likely declare bankruptcy.
Many businesses around the world have closed on government advice, and many of those will go out of business entirely.
Most businesses owe the banks, from a small business to the $34 billion in debt that American Airlines owes. Any defaults are going to be massive.
Millions of people could lose their jobs and be unable to make payments on their credit card debt, car loans, and even mortgages.
With $250 trillion in global debt right now the banks’ capital worldwide is less than $10 trillion.
Therefore, if defaults trigger just a mere 4% loss in total debt, it will exceed the entirety of global bank capital.
The possibility of a tsunami of loan defaults over the next few months could spark a crash in the global financial system that dwarfs the 2008 crisis.
I sincerely hope I’m not being a doomsayer.
Public health officials may radically shift their positions in the coming weeks and tell all the young, healthy people in the world to go back to work, get infected, and start developing immunity but just stay away from the old and infirm.
Governments could be forced to do this to avoid destroying the global economy.
From where we are today though anything is possible. Nothing is out of the question because the arithmetic makes it obvious.
We are reliant on our world leaders of both countries and finance to step up and be counted right now. Some of those could well fall also.
We will keep you informed as the world situation evolves.
As much as you can it would be deemed prudent now to adopt the old Boy Scout Motto of “Be Prepared,” along with another often-said truism, “Be safe out there!”
By Brian George
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